Coherus Oncology, Inc. (CHRS) Earnings Call Transcript & Summary

Good day, everybody, and welcome to UBS Global Healthcare Conference. Our next company presentation here is Coherus Biosciences. From the company, I have Chairman, President and CEO, Denny Lanfear; and Chief Commercial Officer, Paul Reider. Over to you, guys.

Thank you. Thank you, Ash, and thank you for the opportunity to speak again here at UBS in New York and see everyone in person. Let me first apprise you of the forward-looking statements. Just a quick overview. Let me first apprise you the forward-looking statements and refer you to the company's SEC filings with respect to the various products, including YUSIMRY, CIMERLI and UDENYCA. Now I'll first talk a little bit about the strategy, and then we'll go on and talk a little bit about our approach to immunotherapy. And then my good friend, Paul will talk about the commercial execution, which is so important over the next 12 to 18 months for us and what we're going to have there. So first, let me remind you, the company's strategy is focused on leveraging our key assets to create long-term growth and greater shareholder value. We intend to do this by building a leading immuno-oncology company funded by cash flows from approved FDA products, both biosimilar products and immuno-oncology products. The base of our business and our cash flows, of course, are biosimilars. You know several of these, we'll talk about today, UDENYCA, YUSIMRY, our HUMIRA asset, CIMERLI and so on. And then, of course, toripalimab, which is up for approval, and I'll talk a little bit more about the approval process and where we are on that answer in the CRL today. We'll also talk to you about moving forward with toripalimab combinations, including the TIGIT, a little comment and the graphic on what's going on there between T cell and the antigen presenting cell. And then lastly, I'll just give you a quick flyby of our innovative pipeline. We believe that strong execution is really essential in '22 and '23 to transform Coherus into a rapidly growing profitable immuno-oncology company by the mid-2020s. We are projecting $1.2 billion in sales by 2026, and we're going to talk to you about where that's going to come from. But the very first thing we have to do and the highest priority in this company is to execute on portfolio cash flow generation. This is Paul and the commercial team's job, and he'll talk to you about that. Secondarily, execute on toripalimab opportunities. In addition to toripalimab, of course, TIGIT and other opportunities in combination; develop our innovative internal pipeline; and then lastly, do all this in the context of exercising significant business model operating leverage, okay? Over the 6-year planning period, I should say, a 4-year planning period until 2026, we project a 10-fold increase in the addressable market, that the company will go after with its products. We further project a 5x increase in sales from that 10x and only a 20% increase in expenses during that period. That is the operating leverage I'm talking about. We have 4 product launches between now and next July; 4 between now and 2023. UDENYCA, with the on-body device. CIMERLI, this summer, scheduled for approval in August 2 into a $7 billion or $8 billion VEGF space; YUSIMRY, the HUMIRA biosimilar into an $18 billion space; and then, of course, toripalimab into the PD-1s. Now I want to stop here for a moment and just talk a little bit about toripalimab and its role in the company's strategy and its role in the portfolio. And I think this is really important to get right. It is absolutely essential as an IO franchise to have a PD-1. And we believe that we have a market-leading excellent PD-1 with a very unique mechanism of action that we're seeing readout in a number of key studies, right? PD-1s are very, very important because they are the key that unlocks further gains in immuno-oncology, extending the lives of patients. This product has a differentiated profile. If you go on our website, you will see a nice little video. But suffice it to say that it approaches a particular, this FG epitope binding site on the PD-1 on the T cell, and it's binding their results in the internalization of PD-1. We also have a PD-1 that is subject to a very broad development program, and it's in over 18 pivotal clinical trials. And the reason that this is so important is for the implications of further combination therapy. We believe in IO, there's 2 sorts of companies, companies that have their own proprietary PD-1 and companies that do not. If you don't have a PD-1 and you can go and develop various combination agents with PD-1, you still have to do a licensing deal with that molecule owner, Merck, for example, in order to go on that label. So we think this is very important. And we also think that after we get toripalimab approved for nasal pharyngeal cancer, that there will be a number of companies that want to come and do combination studies with toripalimab. Now let me talk a little bit about TIGIT and some of the other IO assets. These will follow behind, of course, toripalimab and increased survival. We view increasing survival as a really key part of the value proposition to cancer patients. Let me talk a little bit about immuno-oncology. Back to the point of extending survival. Checkpoint inhibitors are effective, but patient survival remains very, very challenging. If you have, for example, small cell lung cancer, you can go from maybe 10.4 months survival to like 12.5 months survival, okay, with the PD-L1. That's 2 months of additional survival, right, for a patient. That's not enough. This is why people work on this so much. There is really a long ways to go in terms of patient survival in cancer, particularly in places like small cell lung cancer. And what you see in the graphic here, if you take a look, is you see that all these potential improvements progressively increase the response curve and extend the lives of the patients, particularly with respect to combinations. Combinations really with PD-1 are the keys that will unlock the tumor microenvironment and extend survival for the patients. Now let me talk a little bit just specifically about toripalimab as a molecule compared to nivo and pembro, for example. And there's a nice low graphic that we put together here for you on the right side -- on the left side of this slide. And what you can see is nivo, pembro and tori. And you see, first of all, where they bind. Toripalimab binds to a very unique epitope on PD-1, this FG loop. When it does so, it internalizes -- and I'm going to show you that data in just a moment -- unlike pembro and unlike nivo. Also, it binds with very high affinity. And on the right panel, which you can see is toripalimab's KD is 0.3 versus 7 and 10.5 for pembro and nivo, respectively. This molecule was optimized during its development specifically for the binding to the FG-loop and its affinity. Now let me talk a little bit about PD-1 internalization and why we're so excited about some of the results that are reading out with toripalimab with respect to this. So toripalimab binding to the FG loop then induces subsequent internalization of the PD-1 receptor, removing it from the surface of the T cells. And this is really important. And what you see here on the very left side of this panel, you see the initial binding, you can see everything is on the outside. And then after 6 hours, you see the internalization of the fluorescence tagged toripalimab as it binds to the PD-1 and internalizes. And it then shuts down an entire set of signaling within the T cell which limits that T cells efficacy against antigen-presenting cells or tumor cells. And this secondary mechanism apart from just blocking interactions with PD-L1, we think it's really essential for the enhanced efficacy that we are seeing now, particularly in places like esophageal cancer, where the low PD-L1 data sets had a separation equivalent to that of the high PD-1s. Many of the PD-1s in the market today, I think all of them actually, do not operate in low PD-L1 environments. So toripalimab has demonstrated compelling data in nasopharyngeal cancer. As you all know, it's our first indication. It was filed last year. We also received a complete response for this just recently at the end of April from FDA. The FDA asked us to execute certain quality process changes, which we are about to do. We plan on meeting with the FDA before the middle of the summer and then refiling that BLA with the FDA. These quality process changes, we believe, are very straightforward to address. They are changes not to the production process of toripalimab itself, which is fine. There are changes to the support processes that have to do with how things are actually done in the plant or the frequency of testing or whether you toss out the tubing between runs and things like that. So we think these are very straightforward. Here though, you see the data. This molecule and this data was first on the cover of Nature Medicine. It was selected last year in the plenary session as ASCO, as you can remember. And you can see why. You can see the separation of these curves. This then will give Paul and his team the first PD-1 into nasopharyngeal cancer, defining standard of care when we get approved. Now let me talk just a little bit about TIGIT and a couple of other things, and then I'll hand it over to Paul for the commercial case. There's been much to do about TIGIT lately, particularly there's been some negative TIGIT data, or I should say, data that was perceived to be negative on Roche's drug and so forth. So let me just walk you through this just for a moment. You have at the bottom of this, a T cell, that is the attack cell that would go after the antigen-presenting cell or the tumor cell, right? So what happens with immuno-oncology, and you can see in the very center of this, the PD-L1 is presented on the surface of the tumor cell. And it binds to the PD-1 receptor on the T cell. This was the fundamental discovery of Lieping Chen. Now when you block that then, you shut down one of the intracellular signaling pathways within the T cell, allowing the T cell to go ahead and proceed in terms of pursuing the tumor cell. However, what also happens is there is a secondary effect here that if you internalize the PD-1, you fundamentally change the signaling within the cell. Over on the right side, you see PVR, which is the receptor for TIGIT, and you see TIGIT on the T cell. So TIGIT is another checkpoint. So blocking TIGIT is very important and it's thought that now that you have the PD-1/PD-L1 combination blocked, TIGIT then can exert additional influence in terms of maintaining the immune response in the tumor microenvironment. Now I'll just make 2 quick points here about this. Number one, Roche's study was done not with a PD-1 blocker, but a PD-L1 blocker, which still leaves PD-L2 and still does not address the issue of PD-1 and the signaling within the T cell. Secondarily, I would point out that TIGIT had a what's called an active FC, okay? We have a silent FC. There's a bit of religious argument there in -- with scientists in the field of whether an active or a silent FC with respect to the TIGIT blocker would be most efficacious. The mouse data indicates that an active would be most potent. However, we see now here in the humans, perhaps that isn't the case. So we think this will rage on and some of the other folks in the area, including ourselves, are pursuing silent TIGITs. But there's -- the other last thing I'll point out to you though, there is crosstalk in the T cell between TIGIT and PD-1. And we think that the second-generation internalization and signaling modification within the T cell by toripalimab could make things very, very interesting with respect to TIGIT. So we intend to proceed with TIGIT next year, push it into Phase III. There's a number of indications that we can look at here, small cell, non-small cell, HIC, et cetera. We're watching very closely what others are doing. Sometimes I think you learn as much from failure as you do from success, to select our patient population and to really understand where best to deploy TIGIT with cancer. And then lastly, I'll just talk a little bit about some of the things that we're talking about recently at Coherus, which is our novel innovative pipeline. We have a very sophisticating robust bioinformatic strategy in which we look at patient populations and samples of genomics from various tumors in these various patients, and we understand genomically what is being expressed and not expressed and go after certain molecules and the conversion of certain moieties within those. And this really is designed to impact these immune suppressive cells, which limit the immune system's ability to deal with cancer. You'll see 2 of those things here. One is CHS-1000, which is our ILT4. That is first in line. We intend to file that IND next year. That's proceeding well. We're down to our last 3 product candidates. We just moved that into manufacturing. CHS-3318, which is our CCRA molecule. And of course, we're also working on an anti-CD73 as well as our TIGIT co-formulation with toripalimab. But I would say that what has worked very, very well is the advanced scientific capabilities that we had that we built on the back of the biosimilar business over the last 10 years; our depth in themselves very, very well with the additional few additional biology resources and this genomics bioinformatics effort. So you can expect more from us over the next year or so on this, but I wanted to just give you an update on that. And then I'm going to let Paul Reider, who is the company's Chief Commercial Officer, now discuss the commercial launches planned over the next year or so. Paul?

Thank you, Denny. Good afternoon. We have 4 launches planned really over the next 14 months. And these will be the products that will be increasing our top line revenue between $1.2 billion and $2.2 billion by the end of 2026. They include CIMERLI, which is our biosimilar to the reference product, Lucentis; UDENYCA, our on-body device; toripalimab, which Denny spoke about, our PD-1 inhibitor, first indication will be nasopharyngeal carcinoma and YUSIMRY, which is our biosimilar to the reference product, HUMIRA. Let's start with CIMERLI. This is a large $7 billion anti-VEGF market comprised of the branded agents, Eylea, which generated last year, just shy of $6 billion; Lucentis, which Genentech reported about $1.5 billion; BEOVU, which was Novartis' product, which post launch had some challenges on the safety and inflammation side, which really relegated it to this fairly narrow revenue window and then the off-label Avastin used. It's a growing market, driven largely by the aging population with wet AMD and the confidence in this class and a lot of innovation that's coming into the marketplace, including biosimilars. As Denny mentioned, our action date is August of this year. The filing is progressing well. Interactions with the agency are going as planned. We're scaling up our commercial team, hired a head of sales, and we'll launch with a very focused, dedicated retina specialty team. Our approach to this market between now and launch is really to establish Coherus as a reputable company in the field. It's a new therapeutic area for the company, but our experience and our reputation has preceded us in this market as it's largely a buy-and-bill market and the retinal specialist buy through GPOs with whom we work with in oncology today. But we have to establish ourselves as a company, our expertise in biosimilars, our capabilities and expertise in the buy-and-bill market and also to help increase the education awareness and the confidence level of biosimilars within the retina specialist category as we will be among the first biosimilars in this space. At the time of launch then, our first wave of business will largely come from the Lucentis pool of patients. Again, they did $1.5 billion last year in revenue. But we're very optimistic about our ability to penetrate the book ends into the Avastin and the Eylea space as we believe based on extensive marketing research that depending upon the value proposition, safety and efficacy of the products that there's an opportunity to capture business throughout the other brands as well. What's really important to know about CIMERLI and one of the things that will be very important to retinal specialists is that this is a highly biosimilar agent compared to the originator Lucentis. It's got it nearly identical amino acid sequence. And unlike our competitors at Biogen, we'll be launching with what's expected to be all 5 of the Lucentis indications in both wet AMD as well as the diabetic and we'll also bring to market the dosage forms of about 0.3, which is used in the diabetic patient population and the 0.5. And that's really important because retinal specialists have told us, they don't intend to carry multiple biosimilars here. So the one product that can have the broadest label and all the dosage forms will be very important to them. We're going to optimize our footprint here. We're not going to overbuild and over scale here. We've looked very carefully at the market where the business is using claims data, suggests a high concentration of the Lucentis and the high Eylea users. And so we're going to have a very focused and dedicated retina specialist team. We are going to hire within the retinal community to get existing relationships following on the playbook that we did with UDENYCA and looking at existing oncology talent and existing relationships, which is very important here. So that's going to be our strategy. Our Head of Sales is on board, recruiting the team as we speak. It's an executive who's built and led teams in the retina space for well over a decade. So we feel that we're off to a great start there. Regarding toripalimab, as Denny mentioned, our first indication upon approval would be the nasopharyngeal carcinoma patient population. It's a relatively rare cancer with about a couple of thousand patients that we can point to for sure based on claims data. But what we've learned here as we've investigated this, is that some of these patients that are being treated with NPC can actually be coded as Head and Neck. So the market, we believe, might actually be a little bit larger but still considered a rare cancer, affecting largely younger patients between 50 and 59 and more prevalent in men and also has a higher prevalence in patients with Asian or African dissent. What's important here is that there's currently no PD-1 or PD-L1 products approved for nasopharyngeal carcinoma, which is why FDA has designated this as having regulatory flexibility. And currently, gemcitabine and cisplatin chemotherapy regimen is the standard of care. And so our objective is to, with the approval of toripalimab is to establish a new standard of care for these patients in this high unmet setting. And when you look at really how big could this market be? If you looked at just the 1,300 patients that are treated in this refractory metastatic setting and you applied the KEYTRUDA WACC to it and assume they all got PD-1 agents with -- it sizes out to over $100 million. And so even though rare, cancers can be very attractive markets for us and a great floor way to establish Coherus as an immuno-oncology player now for these patients with significant unmet need. We're entering in the space already, helping oncologists who don't see this on a day-to-day basis, better understand nasopharyngeal carcinoma. We've established this disease education campaign called npcfacts.com, helping doctors really understand the unique nature of this disease and engaging with members of the Head and Neck community. This product will have a significant synergy with our current commercial footprint. We built the commercial infrastructure for UDENYCA to scale up and toripalimab will fit right into the bag. We've got high overlap with our current UDENYCA customers and the physicians that prescribe PD-1s in this case for NPC. And so we'll have very, very strong synergy there. We will leverage our existing payer team to engage with the payers, PBMs or existing field reimbursement managers as well as our key account team for the launch. So the only thing we really had to invest and scale up wise is our patient support services through Coherus Complete to support toripalimab. Now moving on to UDENYCA and our on-body device. Just to kind of take you back a few years when Coherus received approval for UDENYCA in late 2018 and then launch full year 2019, it was rapidly taking share from the innovator, Neulasta at that point in time. And the site is one of the most successful launches in biosimilar history. What then occurred in Q1, as we all know, as COVID began to hit. And then as we were trying to quarantine individuals and keeping patients out of the clinics, Neulasta and particularly the Onpro device was the only product that really had a presentation that was enabling patients to not have to come back. So it really stalled the uptake for UDENYCA. But then what occurred over the last 2 years as COVID has persisted is really entrenched this customer mindset that's been resilient. We still go to work every day, looking for opportunities to tap into the 60% Neulasta business, but will be this device here that I have in my hand that we'll show you here, which is actually the replicate of our on-body device. So it's real. And we announced back last year that we had a successful PK/PD study with the device compared to our prefilled syringe. And that abstract will be in the ASCO abstract book. So you can see the results, if you like. But the plan is to file in 2022 for launch in 2023. And then that will really unlock the next wave of catalytic growth for the brand as we'll be able to target that 47% Onpro business, representing approximately $1 billion opportunity. So our objective for this UDENYCA franchise is really to become the market leader in after 2 decades to take over that position from Amgen and the innovator, and it will be through our on-body device that will really enable us to do that. And finally, YUSIMRY, our biosimilar to the reference product, HUMIRA. As you know, this is the biggest brand in the world, delivered $18 billion globally, $17 billion in the U.S. across multiple indications. We stated at our Analyst Day that our objective is to achieve at least 10% unit market share at peak in the market that we enter, including YUSIMRY. And even if you took a 40% haircut on discounts, 10% would still represent a $1 billion opportunity here for Coherus. So we're very excited to enter into this market. We are going to have an auto-injector device that's nearly identical to the reference product. It's a picture here of our auto-injector. It will have a 29-gauge needle. It will come in a proprietary sting-free, citrate-free formulation, which is really what's most important to both payers, clinicians and patients. And we will expect to have significant supply, which I'll touch on in just a moment. We believe that payers and PBMs are going to be the determining individuals and agents that are going to make the formulary decisions in this marketplace. And we've conducted extensive research with both national and regional payers and PBMs. And what they've told us in terms of what's most important to them in making their decisions have been very consistent. And the first thing is pricing and rebates. And the second is dedicated supply. If they're going to move market share away from HUMIRA, which is estimated to generate about 11 million units annually, they're going to expect manufacturers that have reliable and large manufacturing capability, and we will have that, which I'll describe in a moment. And as you can see, what's less important is interchangeability, which they've consistently said, is a nice to have attribute. It's nice to have because they have the mechanisms in place in product categories that they manage today through the pharmacy benefits to be able to set formularies and manage product utilization outside of an interchangeable designation. Regarding supply, we took another page out of our UDENYCA playbook. It was one of the reasons that Coherus overtook Mylan in that early phase launch despite being the second biosimilar to market, and that's because we invested heavily in supply. And we believe those investments pay off significantly. We've put $45 million in investments into 5,000-liter steel tank manufacturing capability, and we'll have hundreds of thousands of auto-injector units available at the time of launch with the ability to supply up within the current manufacturing facility, up to 30% of the overall market. So we were going to be a high-volume, low-cost producer. And those investments in that supply will afford us a COGS structure where we can compete very heavily on price, and we intend to do so to win those formulary positions. So that concludes my remarks on the commercial strategy. I'll now turn it over to Denny to close.

Thanks, Paul. So let me just give you the summary and the fly by here of what we're doing, where it's going to leave us now in 2026. We believe these near-term launches that Paul has just talked about, and our innovative pipeline position us for long-term growth and sustained shareholder value creation. In 2026, this company is going to be a leading growing immuno-oncology innovator with highly productive R&D, you saw the ILT4 and the CCR8, 4 assets in development. At least 2 assets will be in advanced clinical trials in late stage in combination with toripalimab. We expect to have the BLAs filed for toripalimab and TIGIT under FDA review in any one of the number of combinations that we talked about, lung, small cell lung, et cetera. And then lastly, Paul and his team will be generating for us upwards of $1.2 billion or greater annually in products, products that you can see today, products that -- a couple of these products are already approved today. We're already selling today with a proven commercial strategy and a proven commercial team. So thanks all for joining us today. We're happy to take any questions you might have on -- anything in particular, anything internal? Very comprehensive presentation. I'm not going to game the Amber Heard, Johnny Depp trial, okay? Laurent, I don't know what's going to happen there. All right. Thank you all very much today.